INSIGHT-Nation-states enter contentious patent-buying business

SAN FRANCISCO/SEOUL, March 20 (Reuters) - Patent competitionin the United States is usually a fierce arena for privatecompanies, but now the South Korean and French governments aresuiting up.

Both countries have launched patent-acquisition companies,with the goal of helping domestic technology firms and possiblymaking some money in the process. China and Japan are makingmoves into the business too.

The Korean and French firms, dubbed Intellectual Discoveryand France Brevets, are similar to the handful of privatepatent-acquisition firms in the U.S. derisively called "patenttrolls."

U.S. patent aggregators such as closely-held IntellectualVentures - which don't produce products - are often accused ofunfairly targeting companies that actually build things bythreatening to sue unless they are paid royalties.

The aggregators say they create a more-liquid market forvaluable intellectual property, and help assure that legitimateinventors - especially those who don't work for big corporations- get paid for their breakthroughs. The French and Korean firmshaven't yet filed any U.S. lawsuits.

The advent of state-sponsored intellectual property dealersadds a fresh geopolitical element to the debate about patenttrolls and how to protect legitimate inventions without stiflinginnovation. It could also complicate efforts to improve globalcooperation on trade-related matters such as online piracy andcomputer security.

Congressman Peter DeFazio, a Democrat from Oregon andco-sponsor of a bill designed to limit patent litigation, calledthe new government-backed patent entities a form of"protectionism" that nobody had anticipated.

"This is a whole new level of jeopardy," said DeFazio, whohad not been previously aware of them.

Government-sponsored aggregators are still comparativelyminor players in the patent deals market, and officials involvedwith Intellectual Discovery and France Brevets say they have nointention of pursuing aggressive litigation strategies.

Intellectual Discovery presents itself as a defensivealliance: if a South Korean company finds itself targeted in alawsuit, for instance, it can access the patents being compiledby Intellectual Discovery to hit back.

"It is still in an incubating stage and focusing pretty muchon aggregating IP," said Park Jong-Pil, deputy director at SouthKorea's Ministry of Knowledge Economy, in reference toIntellectual Discovery. "It is not close to a stage of earningbig revenues or identifying entities violating our patents ortaking legal action."

And in a sign that its strategy is not limited to aidingKorean companies, it promptly sold that patent to Google Inc, which is busy developing its Google Glass product. Asource familiar with the deal said the price was less than$100,000.

Intellectual Discovery and Google declined to discuss thedetails.

France Brevets, for its part, owns only four patents in theUnited States and 50 total patent "families," according to vicepresident Yann Dietrich and U.S. patent records. He didn'tdisclose the total number of patents worldwide.

Dietrich said the goal was investing in quality IP so French companies can better monetize their technology.

"We are not playing with the rules to extract money,"Dietrich told Reuters.

TROLL, OR MARKET-MAKER?

Patent reform advocates say patent aggregators haveexploited loopholes in the system and are often little more thanquick-settlement artists who threaten lawsuits with flimsypatent claims registered years after a product hits the market.

But big players such as Intellectual Ventures, launched byformer Microsoft chief technology officer Nathan Myhrvold, saythey prevent upstart companies and independent inventors frombeing ripped off and create a much-needed market for innovation.Several tech companies, including Microsoft Corp andGoogle, as well as universities and foundations, are investorsin Intellectual Ventures, according to court filings.

Companies used to deploy their patents largely for defense,and big tech firms routinely entered into broad cross-licensingagreements enabling them to use many of one anothers'technologies.

But that equation has changed over the past several decadesas the value of breakthrough inventions in digital technologyhas soared. Tech firms began to see patents as a strategicweapon - and entrepreneurs like Myhrvold saw a businessopportunity.

The result has been an explosion of patent litigation -especially in the mobile computing arena, where Apple has filednumerous patent infringement lawsuits against its major rivals,with mixed results.

The spiraling patent litigation, which some attribute atleast in part to the aggregators, is seen by many in theindustry as wasteful, and a threat to innovation. That in turnhas attracted the attention of Congress.